Did you know more than 100 million people have a low credit score or no credit score at all? Naturally, a credit score — and preferably a good one — is necessary for many big financial moves, like buying a house or a car. It’s also often necessary for insuring those items.
Of course, you can always rent instead of buying a home and buy a less expensive vehicle or use cash if you have a low credit score. But what happens when it comes time to insuring your new ride? Keep reading to learn how your credit score impacts your car insurance rate and how you can still get a policy when you have bad credit.
How Your Credit Score Impacts Your Car Insurance Rate
If you think the only thing insurance companies are worried about is your driving record, think again. Your finances are also important. After all, these providers want to ensure you’ll be able to continue paying your premiums. Many car insurance companies use your credit score to determine whether they’ll offer you a policy and your premium costs.
Your credit report, including details about any past due payments, the number of accounts open, types of credit you use, and more, is used in factoring your insurance score. A low insurance score — which often comes from a low credit score — has actually been proven to be linked to a higher rate of insurance claims. From the insurance providers’ point of view, this suggests if you have a low credit score, you’ll cost them more in claims. As a result, they may opt to raise your premiums preemptively or deny you a policy altogether.
How to Find Budget-Friendly Car Insurance with Bad Credit
For some insurance companies, having a bad credit score will result in higher premiums. Luckily, this isn’t necessarily the case across the board. Some insurance providers rely more heavily on other factors to determine your insurance premiums. In particular, many also consider your age, state of residence, driving and claims history, and the vehicle make and model. For instance, if you own a sports car, be prepared to pay a higher insurance rate than you would for a traditional sedan or SUV.
Your best option? Shop around for cheap car insurance to compare rates from various providers before deciding. When you find a provider within your budget, ask about any discounts they may offer. Many providers offer discounts for students, those with a history of safe driving, and for bundling different types of insurance.
Saving on Premiums without Sacrificing Coverage
Having a bad credit score often means you’ll pay higher insurance premiums or struggle to land a policy from some providers. Opting for less coverage and higher deductibles can help lower your monthly costs. But, if disaster strikes, it’s important to realize you could wind up in a worse financial situation than if you paid higher monthly premiums. Fortunately, by shopping around for policies and checking for discounts, it’s still possible to find budget-friendly policies without sacrificing the coverage you need.